Pound crashes to $1.03 against the dollar. Have the Tories wrecked the UK economy?

The Conservative Party likes to be thought of as the party of fiscal responsibility, but that reputation is lying in tatters.

First, they gave us Brexit, which hurt trading arrangements, increased red tape and discouraged immigration to the UK. Now the markets have reacted to their shameless budget for the rich by kicking the sh*te out of the pound and increasing UK government bond interest rates.

The UK is a net importer of goods, from the Office for National Statistics:

the UK’s total trade deficit for goods and services, excluding precious metals, widened by £2.0 billion to £27.9 billion in Quarter 2 2022, which is the largest on record. Total imports increased by £14.3 billion to £206.6 billion, and total exports increased by £12.3 billion to £178.6 billion

When the pound drops, this makes imports more expensive. in simple terms, the prices of goods will increase.

The government will likely respond by increasing interest rates, this in turn will increase mortgage payments and other loans.

The bottom line is an already terrible cost of living situation is going to get worse as more family income will go on increased energy costs, mortgage payments and increased food and other imported goods. Overseas holidays will get more expensive. Then factor in rising inflation.

As consumer budgets tighten, they spend less in shops and on entertainment; thus, more businesses will go bust.

The one bright side of a low pound is it makes British exports cheaper. Just a pity they ditched their free market trading with their largest EU trading partners.

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